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MTN reducing stake in Nigerian business slowed by Covid-19

The fallout from the Covid-19 pandemic doesn’t change the importance of selling part of the 79% shareholding to local investors, says CFO

31 March 2020 - 17:46 Loni Prinsloo

MTN CFO Ralph Mupita. Picture: FREDDY MAVUNDA

MTN will push on with a plan to reduce its majority stake in the wireless carrier’s Nigerian business, though turmoil caused by the coronavirus may require the sale to be done in smaller chunks than anticipated.

The impact of the Covid-19 pandemic on international financial markets doesn’t change the importance of selling part of the 79% shareholding to local investors, CFO Ralph Mupita said in an interview. However, the rest of a three-to-five year plan to dispose of R25bn of assets will probably take a back seat for now, he said.

“In Nigeria we still want to do part of our retail offer, even if it’s a smaller part of the total planned sale. We are applying our minds to doing this at the moment.”

MTN is disposing of part of its largest division after a series of disputes with Nigerian authorities, most recently over tax payments and the withdrawal of cash from the country. The plan is to sell about a 15% stake to local investors, reducing MTN’s ownership to about 64%.

MTN Nigeria Communications was listed in Lagos last year, and is the country’s second-biggest publicly traded company. Nigeria is MTN’s biggest market, accounting for a third of overall 2019 revenue and almost 40% of earnings before interest, taxes, depreciation and amortisation (ebitda).

The company is also the biggest provider of telecom services in the country, with almost 69-million customers, according to the Nigerian Communications Commission.

The drastic fall in oil prices, hurting major producers including Nigeria, and the outbreak of the coronavirus has weighed on MTN’s share price, which hit 15-year lows last week. The stock has since rallied for six straight days, and closed 17.93 % higher at R47.88.

“We, of course, have no visibility on how all of this could play out, but the business currently has a resilient balance sheet and is highly cash generative, with most of our business coming from pre-paid contracts,” Mupita said.

MTN’s cash position was bolstered by the sale of R14bn in assets last year, including stakes in telecom-tower companies in certain African markets. Some of that was paid in dollars, which provides a currency hedge against the weakening rand, the CFO said, adding that MTN also has a credit facility that can be accessed if needed.

MTN expects an increase in data usage as more and more of its markets go into lockdown due to the outbreak of the coronavirus. “We want to make sure that our networks have resilience and capacity,” Mupita said. “We are looking at where we can drive broader coverage.”